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Productivity investment with hidden action

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  • Marino, Anthony M.

Abstract

This paper considers a hidden action agency model in which an agent can be incentivized to simultaneously work and exert effort to increase productivity. When such multitasking is optimal, it is implemented through a higher powered contract, unlike the standard multitasking case. We determine conditions under which the principal wants to incentivize concurrent working and productivity investment and conditions under which the agent would want to participate. We show that these conditions are not the same. Multitasking is compared to separated tasks. Our results can help explain the skills gap.

Suggested Citation

  • Marino, Anthony M., 2021. "Productivity investment with hidden action," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 154-163.
    • Handle: RePEc:eee:jeborg:v:190:y:2021:i:c:p:154-163
    DOI: 10.1016/j.jebo.2021.07.033
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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